MF Global collapsed after the firm was forced to reveal that it had made a $6.3 billion bet on European sovereign debt, spooking investors. An effort to sell the firm failed, partly because of the revelation that hundreds of millions of dollars in customer money was not where it should have been.

The first regulator to flag problems with MF Global was the Financial Industry Regulatory Authority, which self-polices securities brokers. In June, FINRA raised concerns that the firm had a substantial position in European sovereign debt and was not appropriately holding capital against it.

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FINRA also questioned whether it was appropriate for MF Global to use Generally Accepted Accounting Principles to park the exposure off balance sheet.

MF Global was financing its European sovereign debt bets through ``repo-to-maturity'' transactions, which allowed it to move the exposure off its balance sheet, even though the firm still faced enormous risk in the case of a default.

FINRA and the SEC ultimately forced MF Global to increase its capital. The firm later disclosed the capital infusion in September.

Schapiro said the Financial Accounting Standards Board, which sets U.S. accounting standards, recently decided that repo-to maturity is the only kind of repo transaction that qualifies for off-balance sheet treatment. But in light of MF Global's demise, regulators are now rethinking that approach.

``We are talking to FASB about whether that is a policy that ought to be changed,'' she said. ``They did improve the disclosure around it, but there is a question I think about whether repos-to-maturity should be included on the balance sheet.''

At least one senator seemed to think that was a good idea.

``That is a loophole so big you could drive a Mack Truck through it,'' said Democratic Senator Kent Conrad. ``If that's not closed down, we really got to ask ourselves what we're doing.''

Schapiro said MF Global did disclose its net exposure to sovereign debt in a regulatory filing. The company also disclosed its gross exposure, though ``not as clearly,'' she said. (Editing by Phil Berlowitz, John Wallace and Lisa Von Ahn)